The encyclopedia · Strategy & Leadership · Financial decision · 2015
Toys R Us built a Times Square store with a Ferris wheel — the rent outgrew the toys
The flagship opened in 2001 near $400 a square foot; by 2015 the ground floor alone was marketed at $2,500, and Toys R Us walked away.
Toys R Us · 2015-12-30
What happened
Toys R Us opened its Times Square flagship in 2001: a 110,000-square-foot, four-level store built as a tourist attraction as much as a toy shop, with a 60-foot indoor Ferris wheel, a six-meter animatronic Tyrannosaurus Rex and a life-size Barbie dollhouse. The lease locked in Times Square rent from an earlier era, before the neighborhood's retail values climbed into the country's highest.
By the mid-2010s, ground-floor Times Square retail space was being marketed at roughly $2,500 a square foot, against the roughly $400 a square foot the original 2001 lease reflected. A brick-and-mortar toy retailer already losing ground to Amazon and Walmart could not carry that rent on toy margins alone, and Toys R Us chose not to renew.
The store closed for good on December 30, 2015, after 14 years, taking its Ferris wheel and dinosaur with it. Toys R Us itself filed for Chapter 11 bankruptcy less than two years later, in September 2017, and liquidated its remaining U.S. stores in 2018.
Why it happened
- The flagship's spectacle — a Ferris wheel, a giant dinosaur — drove foot traffic and brand attention but not toy sales large enough to cover Times Square rent.
- Manhattan retail rents rose far faster than toy-store revenue could over the same 14-year lease period, turning a marquee location into a liability.
- The company was already losing market share to Amazon and Walmart, leaving no cushion to absorb a lease renewal at six times the original rate.
- A flagship built for brand image rather than unit economics had no plan for what to do once the image cost more than the business could earn back.
The lesson
A flagship store justified by brand spectacle still has to clear the rent — and marquee locations get more expensive faster than most retail businesses grow.
Aftermath
Toys R Us closed the Times Square store on December 30, 2015, ending its run as one of the neighborhood's best-known attractions. The company filed for Chapter 11 bankruptcy in September 2017 and liquidated nearly all of its roughly 800 U.S. stores by mid-2018, before a smaller relaunch under new ownership years later.
Sources
- Ferris wheel and giant T Rex can't pay N.Y. rent as Toys R Us closes flagship store — CBC News
- The Real Reasons Toys 'R' Us Quit Times Square — Forbes
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